Corporate Crime & Investigations Update - 22 July 2016

Included in this issue: $3.5bn forex trading probe: charge of HSBC Global Head; Likely hack of U.S. banking regulator by China; Fraud and bribery in the Syrian aid response exposed by investigation in US and more...

Bribery and Corruption

$3.5bn forex trading probe: charge of HSBC Global Head

Mark Johnson, HSBC's global head of foreign exchange trading for the Americas was arrested in New York and charged on Wednesday. Stuart Scott, who is a former colleague, has also been named on the indictment but has not yet been arrested.

They have been accused by the US Department of Justice of "front-running" a currency deal which allows a broker to benefit from a client's trade by using confidential information. They are alleged to have bought sterling on "proprietary" accounts and traded in a manner to spike the price of sterling prior to conducting the client transaction to exchange $3.5bn into British pounds. By so doing, they are said to have made $8 million in profit for HSBC from the trade.

SFO investigation into Unaoil

The Serious Fraud Office has confirmed it is conducting a criminal investigation into the activities of the Monaco oil contractor, Unaoil, its officers, its employees and its agents in connection with suspected offences of bribery, corruption and money laundering. Unaoil acts as an agent to assist corporates in overseas markets and have worked with various multinationals including Rolls-Royce, Petrofac and Halliburton.

The Monaco firm was also implicated earlier this year in an international corruption scandal by investigative journalists in Australia.

Cybercrime

Likely hack of U.S. banking regulator by China

According to a recent congressional report, the Chinese government are likely to have hacked computers at the Federal Deposit Insurance Corporation (FDIC) in 2010, 2011 and 2013. Further, the report alleges that employees at the U.S. banking regulator covered up the intrusions.

The report notes that an internal FDIC investigation has identified Beijing as likely to be behind the attacks and that these attacks were covered up to protect the job of FDIC Chairman Martin Gruenberg, who was put forward for his post in 2011.

There is no specific evidence in the report that China was behind the hack.

Chinese hacker has been sentenced by the US for stealing military information

Su Bun, a Chinese businessman, who previously pleaded guilty to hacking sensitive military information has been sentenced in the US to just under four years imprisonment. Su Bin has admitted to collaborating with Chinese military hackers to steal data from US defence companies between the years 2008 and 2014. The data he stole from transport planes and fighter jets was then sold onto Chinese companies.

The Los Angeles Court ordered Su to a 46-month prison sentence and to pay a $10,000 (£7,600) fine.

Fraud

Fraud and bribery in the Syrian aid response exposed by investigation in US

United States Agency for International Development (USAID) has announced that their investigations have exposed bribery and fraud in Syrian aid programs. This announcement has raised concern about profiteering in the humanitarian sector.

Investigations have found that collusion between companies selling humanitarian supplies and staff of USAID's local partners who accepted bribes or rewards in exchange for help in winning a contract, are among the most common type of fraud identified.

Further, there were instances when aid items were substituted for cheaper alternatives resulted in inflated billing.

Health and Safety

Metal company fined £20,000 for safety failings

A worker from Rotherham Group Realisations Limited sustained fractures to his right arm, wrist and hand when turning and polishing metal bars. No specific instructions on how this should be completed were provided and he was holding an emery cloth in his gloved hand around the rotating lathe when his hand came into contact with the lathe.

An investigation by the Health and Safety Executive revealed that the risk assessment for using the lathe was insufficient or lacked suitability.

Rotherham Group Realisations Limited was fined £20,000 and ordered to pay costs of £4,316 after pleading guilty to breaching Section 2(1)of the Health and Safety at Work Act 1974.

£200,000 fine for glass company fined after worker was injured

Saint Gobain Glass (United Kingdom) Limited had allowed a metal working lathe to be adapted in order to re-rope conveyor rollers in-house. On 27 April 2015, the worker became entangled with the machinery after the operator’s clothing became caught on the roller and he suffered damage to his hand and wrist.

The Health and Safety Executive found that there was a lack of "suitable and sufficient risk assessment which could have prevented this incident from happening".

Pleading guilty to breaching Section 2(1) of the Health and Safety at Work Act 1974, Saint Gobain Glass was fined £200,000 and ordered to pay costs of £3,137.

Building site manager found guilty of gross negligence manslaughter

A building site manager who had a “total disregard of health and safety” has been convicted of gross negligence manslaughter following the death of a 40-year-old worker who died when he fell through a skylight.

The HSE investigation discovered that Mr Patel was the manager on the building site and had asked Mr Tasadaq to fit windows on the first floor. He was found guilty of manslaughter by gross negligence after a trial at Birmingham Crown Court. Mr Patel also pleaded guilty in December 2015 to three health and safety offences. He was sentenced to 2 ½ years in prison for manslaughter by gross negligence and eight months in prison for the health and safety offences

Conviction following drowning of school boy

A schoolboy has died after being submerged in a pool that had no lifeguards and no-one able to give first aid.

Six-year-old Aidan Sands, who could not swim, died during a trip to the leisure centre at the Red Lion Caravan Park in Arbroath in June 2011.

Loch Earn Caravan Parks Ltd, was fined £234,000 over health and safety failings that led to the tragedy. The company admitted failing to carry out a suitable risk assessment, failing to ensure safety of all people using the pool, failing to ensure adequate supervision and failing to provide sufficient information and training to employees.

Money Laundering

Singapore to take action against UBS and Standard Chartered for 1MDB lapses

Singapore has widened its investigation into the mis-appropriated funds linked to a politically connected Malaysian state investment company known as 1MDB. Singapore considers there to be "serious lapses" in the anti-money laundering controls of four banks and is looking to take action against them.

Preliminary findings from Singapore central bank reveals “instances of control failings” in UBS Group AG’s Singapore branch, a local unit of Standard Chartered Plc and DBS Group Holdings Ltd., in addition to “substantial breaches” of anti-money laundering regulations at Falcon Private Bank Ltd.

General

ECB decision on the disclosure of confidential information for criminal investigations

In relation to the disclosure of confidential information in the context of criminal investigations, the Governing Council of the European Central Bank (ECB) has issued Decision (EU) 2016/1162.

Both the ECB and national competent authorities (NCAs) can receive requests from national criminal investigation authorities for the disclosure of confidential information created or received in the course of carrying out their role. Principally, the disclosure of confidential information related to monetary policy and other ECB/Eurosystem-related tasks is captured within this decision.

The independence, functionality and duty to uphold professional secrecy of the ECB is not compromised by the introduction of this decision. The interest of the public will continue to be a consideration for the ECB along with the duty to refrain from publishing, in circumstances where damage would be done to those interests.

Advocate General Opinion issued in relation to retention of data

A recent opinion of the Advocate General provided to the European Court of Justice in relation to the current domestic provisions regarding the retention of data considers that those powers extend beyond that which is strictly necessary for the purpose of fighting against serious crime.

This opinion from the Advocate General follows from an earlier decision of the European Court of Justice on the Data Retention Directive (2006) and is likely to lead to a challenge on the use of any powers proposed under the forthcoming Investigatory Powers Bill which go beyond what is strictly necessary for the purpose of fighting against serious crime.